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CPA Exam - BEC (1).

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Exam of 14 pages for the course CISA: Domain #2, Part A: IT Governance at CISA: Domain #2, Part A: IT Governance (CPA Exam - BEC (1).)

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  • July 17, 2024
  • 14
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers
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CPA Exam - BEC
Question - ANS-Answer

how often does an internal audit activity need to be assessed externally? - ANS-every five
years.

what are the primary themes associated with internal audit attribute standards - ANS-(1)
Purpose, Authority, and Responsibility; (2) Independence and Objectivity; (3) Proficiency and
Due Professional Care; and (4) Quality Assurance and Improvement Program.

the 7 primary themes of the performance standards: - ANS-(1) Managing the Internal Audit
Activity; (2) Nature of Work; (3) Engagement Planning; (4) Performing the Engagement; (5)
Communicating Results; (6) Monitoring Progress; and (7) Resolution of Senior Management's
Acceptance of Risks.

in a conventional graph, the 'intercept' is the point at which: - ANS-the dependent variable
intersects the Y axis, and where the independent variable has the lowest value, usually zero

elasticity of supply? - ANS-%change in quantity supplied/%change in price

what is elasticity of demand? - ANS-the % change in quantity is greater than the % change in
price

how do you prevent deflation? - ANS-you increase the money supply by lowering the reserve
requirement, or lowering interest rates which stimulates demand and increases the general
price level

what does an import quota do? - ANS-it restricts the quantity of a commodity that can be
brought into the country from foreign providers. The biggest beneficiary is the domestic
suppliers of the commodity.

3 generic strategies by Michael Porter? - ANS-cost leadership, differentiation, and focus

which framework is for gauging the attractiveness of the competitive environment of an
industry? - ANS-five forces

what analysis method is for evaluating a macro-environment? - ANS-PEST analysis: political,
economic, social, and technological characteristics

, what are the five forces? - ANS-1-threat of new competition entering the market2-threat of
substitute goods or services3-bargaining power of buyers of the industry good or
service4-bargaining power of suppliers of the inputs used in the industry5-intensity of rivalry

what does SWOT stand for? - ANS-strengths and weaknesses of the entity, and the
opportunities and threats faced by the entity

how is weighted avg cost of capital calculated? - ANS-the required rate of return on each source
of capital weighted by the proportion of total capital provided by each source and then those
amounts are summed.debt:30%x(10% 1-30% tax rate)=2.1%CS: 60%x12%= 7.2%PS:
10%x10%= 1%WACC= 10.3%

what is a compensating balance and how is the effective interest rate calculated? - ANS-an
amount the borrower has to maintain in an account with a lender.the effective int rate is the cost
of borrowing divided by the funds available for use.If the interest each year is 40,000 and the
only amount you can actually use is 400,000, then the effective rate is 10%.

how is the required rate of return calculated? - ANS-risk free rate + Beta(expected rate - risk
free rate)

basic approach to capitalize earnings to determine value of business? - ANS-annual earnings /
required rate of return.

what is a time series model? - ANS-models based on extrapolation of past data to predict a
future value

delphi method? - ANS-form of qualitative forecasting that involves consensus of a group of
experts using a multi-stage process to converge on a forecast.

diff in quantitative & qualitative forecasting? - ANS-quantitative is objective and rely on math and
calculations. qualitative are subjective and rely on judgement and opinion

what is the profitability index approach? - ANS-the relative economic ranking of projects by
taking into account the cost & net present value of projects

average accounting rate of return? - ANS-avg annual after tax net income / avg cost of
investment.the avg cost of investment is the beg book value + ending bv then divided by 2.

formula for calculating the profitability index of a project? - ANS-present value of annual after tax
cash flows / original cash invested in the project

NASDAQ requires all companies have audit committees composed entirely of: -
ANS-Independent directors who are also financially literate

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